Introducing The Corporate Transparency Act

In this latest blog, we’ll be diving into the Corporate Transparency Act (CTA), a pivotal piece of legislation that’s stirring up the business world. Yes, I can almost hear the collective groans and see the eye rolls. Another layer of federal bureaucracy to navigate? Just what we all needed, right? But before you start imagining endless forms and red tape, let me guide you through the maze.

Background Check: Unmasking the Corporate Transparency Act

The CTA, passed as part of the National Defense Authorization Act for Fiscal Year 2021, marks a significant shift in the U.S. approach to corporate registration and reporting. The Act aims to peel back the layers of anonymity in business ownership, primarily to combat money laundering and financial fraud.

Why It Matters: No More Hide and Seek

For business owners, the CTA isn’t just another regulatory hoop to jump through. It’s a game-changer. By requiring companies to disclose their beneficial owners, the Act promises greater accountability and transparency. This move is pivotal for fostering trust in the business ecosystem, attracting investors, and deterring illicit activities.

Who Has To Report?

Under the CTA, a ‘reporting company’ (RC) is broadly defined. It typically includes corporations, LLCs, and other similar entities created by filing a document with a state secretary or similar office. But it’s not just about formation; foreign entities that register to do business in the U.S. also fall under this umbrella. In 2024, if your business structure aligns with these definitions, pay attention – the CTA likely applies to you.

Who is Exempt?

Not everyone is in the spotlight. The corporate transparency act carves out exemptions for certain entities in highly regulated areas, and understanding these is crucial. Exempt entities include:

    • Publicly traded companies (they already follow stringent reporting requirements).

    • Certain regulated entities like banks, credit unions, and insurance companies.

    • Companies with a physical presence in the U.S., more than 20 full-time employees, and reported sales or gross receipts exceeding $5 million on tax returns.

Is My Filing Public Information?

The Beneficial Owner Information (BOI) is not a public form and will not be accessible by the public. The BOI will be available to law enforcement, state, and local government agencies with a court order, federal financial regulators, and financial institutions with consent of the RC.

What if I Don’t Report?

I know it’s tempting to want to blow off the government when it comes to more red tape, but reporting companies and their senior officers need to tread carefully. If they willfully neglect to file or update a required report, they could face a steep fine of $500 for each day the violation continues. This can balloon up to a maximum of $10,000. But that’s not all – they could also find themselves behind bars for up to two years. However, there’s a bit of a lifeline: if an RC realizes they’ve submitted an inaccurate report, they can avoid these penalties by promptly correcting it, ideally within 90 days of the initial filing.

2024 Compliance: Mark Your Calendars!

As a business owner, when navigating the corporate transparency act it’s crucial to have a clear, actionable strategy for compliance. Here’s a streamlined guide and summary of what you, as a business owner, should do:

1.       Determine Your Reporting Company Status:

Review and understand the corporate transparency act and its definitions and exemptions to determine if your business is categorized as a ‘reporting company.’ This typically includes most corporations, LLCs, and foreign entities registered in the U.S. (so probably most business owners reading this). You’ll need to disclose specific details to FinCEN. This includes identifying information about your company (like name and address) and your beneficial owners.

2.       Identify Beneficial Owners:

Pinpoint individuals who own more than 25% of the company or have significant control, regardless of ownership percentage (Yes, the CTA wants to know who’s really calling the shots.). Collect their names, birthdates, addresses, and identification numbers (like passport or driver’s license).

3.       Gather and File Accurate Information with FinCEN:

Compile accurate legal names, addresses, and ID details of all beneficial owners. File this information with the Financial Crimes Enforcement Network (FinCEN), ensuring it remains current and updated.

4.       Timely Reporting and Updates:

Adhere to deadlines for initial and subsequent filings. For entities formed or registered after January 1, 2024, file at formation. Existing entities should update their information by January 1, 2025.

5.       Consult with Legal and Compliance Experts:

Seek advice from professionals knowledgeable about the corporate transparency act to align your compliance strategies with legal requirements and set up effective maintenance procedures. Which includes the filing of the CTA form itself.

6.       Develop and Maintain Internal Compliance Procedures:

Establish a system for regular updates on beneficial ownership information, create a schedule for compliance checks, and train relevant staff on CTA requirements.

7.       Educate Your Team and Monitor Compliance:

Ensure your team understands the importance of the CTA. Regularly review and update your compliance strategies to stay aligned with any changes in the Act.

8.       Plan for Long-Term Compliance:

Integrate the coportate transparency act compliance into your long-term business planning. Stay informed about any exemptions and privacy considerations, as the information submitted under the CTA is confidential and accessible only to specific entities like law enforcement and financial institutions.

Final Thoughts on the Corporate Transparency Act

The Corporate Transparency Act might seem daunting but understanding these key components – what defines a reporting company, the exemptions, and the specific filing requirements for 2024 – is crucial. Whether you’re a startup founder or a seasoned entrepreneur, staying informed and prepared is the best strategy to tackle these new regulations. Let’s navigate these compliance waters together. Give Fargo Patent & Business Law a call today, keeping your business compliant so it can continue to do what it does best.


North Dakota

Austan is an experienced North Dakota business attorney. He works with clients on legal matters including investment law, securities, trademarks, business contracts, business formation, and more. If you are in need of a local business attorney, contact Fargo Patent & Business Law today.